Container Stevedoring Company appeals the Department of Labor Benefits Review Board's ("Board") affirmance of an Administrative Law Judge's decision against it. Container Stevedoring argues that it is entitled to relief from the Special Fund in its obligation to compensate Albert Gross for permanent partial disability. 33 U.S.C. Sec. 908(f). Also, Container Stevedoring contests the determination that Mr. Gross has lost any wage-earning capacity, and that it must compensate him for the loss at a rate of $163.28 per week. This court has jurisdiction of the timely appeal. 33 U.S.C. Sec. 921(c). We affirm.

On April 10, 1984, Albert Gross suffered injuries when the truck load he was transporting for his employer, Container Stevedoring Company, shifted, throwing him about in the truck's cab. After being treated for about a year and a half, Mr. Gross returned to light work at Container Stevedoring. He was released for full-time work in November, 1985 and has continued from that time to work essentially full-time. However, Mr. Gross also has continued to complain of pain and to receive some treatment for his injuries to the present time.

He filed a claim for disability compensation in October, 1986. After some correspondence with the claimant, the deputy commissioner at the Office of Workers' Compensation Programs (OWCP) referred the case on June 3, 1987 to the Office of Administrative Law Judges (OALJ) for a formal hearing. Pre-hearing statements were filed pursuant to the ALJ's order in December, 1987 and the hearing was held in January, 1988.

In May, 1988, the ALJ found that Mr. Gross had suffered temporary partial disability from the date of his accident until January 16, 1986. The ALJ also found that Mr. Gross had suffered an unscheduled permanent partial disability to his back and a separate scheduled permanent partial disability to his leg. The ALJ awarded compensation for all three of these disabilities. Despite the fact that Mr. Gross presently earns higher wages than before his injury in 1984 (1983: $56,000; 1987: $60,000), the award for his permanent disabilities includes $163.28 per week in lost wage-earning capacity.

Container Stevedoring simultaneously sought relief from the Special Fund established in 33 U.S.C. Sec. 944 for any liability it might have for Mr. Gross' permanent disabilities. The ALJ held that the OWCP had an absolute defense to Special Fund liability for Mr. Gross' claim due to Container Stevedoring's untimely application for relief from the Fund, or, in the alternative, that the Special Fund has no liability on the merits of Container Stevedoring's application.

The Benefits Review Board affirmed the ALJ's decision, and Container Stevedoring appealed to this court, arguing that it should not be barred from seeking Special Fund relief and should obtain that relief on the merits. Container Stevedoring also argues that the ALJ's determination that Mr. Gross' post-injury wages do not fairly represent his wage-earning capacity is not supported by substantial evidence.

The Benefits Review Board reviews administrative law judges' decisions to determine whether factual findings are supported by "substantial evidence" and to correct any errors of law. 33 U.S.C. Sec. 921(b)(3). This court conducts an independent review of the administrative record to determine if the Board adhered to its standard of review. Bumble Bee Seafoods v. Director, OWCP, 629 F.2d 1327, 1329 (9th Cir.1980). Like the Board, this court cannot substitute its views for the ALJ's views or engage in de novo review of the evidence. The ALJ's findings must be accepted when they are supported by substantial evidence. Id. The Supreme Court has defined substantial evidence as "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S. Ct. 456, 459, 95 L. Ed. 456 (1951). Substantial evidence is not evidence considered in isolation from opposing evidence, but evidence that survives "whatever in the record fairly detracts from its weight." Id. at 488, 71 S.Ct. at 464.

Container Stevedoring seeks relief from its compensation responsibilities through the Special Fund for disabled employees under 33 U.S.C. Sec. 908(f). Employers are required to apply for Special Fund relief "to the deputy commissioner prior to the consideration of the claim by the deputy commissioner." Sec. 908(f)(3). Failure to do so is an absolute defense to Special Fund liability "unless the employer could not have reasonably anticipated the liability of the special fund prior to the issuance of a compensation order." Id.

Permanent disability is a prerequisite to Special Fund relief. Sec. 908(f)(1). Container Stevedoring argues that existence of a permanent disability was not an issue in this case before the deputy commissioner referred the case to the OALJ. Therefore, it could not possibly have complied with the statute by applying for Special Fund relief before the case was transferred to the OALJ. Container Stevedoring's argument is contradicted by the facts. As early as October 1986, Mr. Gross stated in his claim for compensation that his injury resulted in "severe permanent injuries to back, neck, legs, head, face and teeth." Four months earlier in June 1986, the Orthopaedic Panel informed Container Stevedoring that, in its opinion, Mr. Gross had suffered a three percent permanent partial disability from a vertebrae fracture. The panel said it knew of no treatment that would cure his back pain and recommended that even after an endurance program he should not lift over sixty pounds. These reports were sufficient to place the existence of permanent disability in issue before the deputy commissioner and to put Container Stevedoring on notice that it was in issue.1

The regulations instruct employers that a "request for section 8(f) relief should be made as soon as the permanency of the claimant's condition becomes known or is an issue in dispute." 20 C.F.R. Sec. 702.321(b)(1).2 In this case, permanency was in issue arguably on June 19, 1986 when the Orthopaedic Panel issued its report, and certainly no later than Mr. Gross' claim for compensation on October 23, 1986. In keeping with the regulations, Container Stevedoring should have filed its application for Special Fund relief at that time. After October, Container Stevedoring delayed over seven months without submitting an application. At the very least, in April 1987 when the deputy commissioner requested pre-hearing applications which are used to prepare a case for a formal hearing before an ALJ, Container Stevedoring should have recognized that the deputy commissioner considered its work completed and should have raised the issue of Special Fund relief immediately. Instead, Container Stevedoring delayed raising the issue until after the deputy commissioner transferred the case to the OALJ.3

Container Stevedoring next notes that the deputy commissioner must "consider the claim" before an application for Special Fund relief can be labeled untimely, Sec. 908(f)(3), and argues that the deputy commissioner never considered Mr. Gross' claim of permanent disabilities before he referred it to the OALJ. It is true that the deputy commissioner never held even an informal hearing on any issue in this case. However, the regulations make clear that the deputy commissioner can "consider" a claim in many ways short of a hearing:

The deputy commissioner is empowered to resolve disputes with respect to claims in a manner designed to protect the rights of the parties and also to resolve such disputes at the earliest practicable date. This will generally be accomplished by informal discussions by telephone or by conferences at the deputy commissioner's office. Some cases will be handled by written correspondence.

20 C.F.R. Sec. 702.311. After Mr. Gross filed his claim in October 1986, the deputy commissioner considered and responded to written correspondence on December 30, 1986, on March 24, 1987, and finally on June 3, 1987, when he referred the case to the OALJ. This correspondence dealt exclusively with the temporary total disability part of Mr. Gross' claim. Although the regulations require the deputy commissioner to consider all new and additional issues raised in the course of proceedings before the case is transferred to the OALJ, 20 C.F.R. Sec. 702.317(d), nothing in the statute or regulations requires the deputy commissioner and the parties to correspond on every issue that has been raised before the case is transferred.

In short, Sec. 908(f)(3) and the associated regulations instruct the deputy commissioner to consider the claim, but do not require correspondence or an informal hearing. Absent evidence that the deputy commissioner decided to transfer the case to the OALJ before evaluating every aspect of the claim,4 we will assume that the deputy commissioner did consider every aspect of the claim when deciding whether to transfer it for a formal hearing. The regulations instruct the deputy commissioner that

where permanency has been raised, the failure of an employer to submit a timely and fully documented application for section 8(f) relief shall not prevent the deputy commissioner, at his/her discretion, from considering the claim for compensation and transmitting the case for formal hearing.

Sec. 702.321(b)(3). The lack of detailed correspondence from the deputy commissioner in this case did not preclude him from considering the case and transferring it to the OALJ. Likewise, the lack of detailed correspondence does not excuse Container Stevedoring for its delay in applying for Special Fund relief.

We agree with the ALJ's conclusion that the OWCP had an absolute defense to Special Fund liability based on Container Stevedoring's untimely application. The ALJ determined, in the alternative, that Container Stevedoring should not be granted Special Fund relief based on the merits.5 The Board avoided the procedural issue altogether and affirmed on the merits. We are not bound by the Board's analysis even if we agree with the Board's conclusion. J.M. Martinac Shipbldg. v. Director, OWCP, 900 F.2d 180, 181 (9th Cir.1990); Todd Shipyards Corp. v. Director, OWCP, 848 F.2d 125, 127 n. 3 (9th Cir.1988); see 33 U.S.C. Sec. 921(c). We decline to consider the merits of Container Stevedoring's claim for Special Fund relief because the OWCP timely raised an absolute defense to the relief.

The relevant statute in this case requires the ALJ to calculate compensation as "66 2/3 per centum of the difference between the average weekly wages of the employee and the employee's wage-earning capacity thereafter in the same employment or otherwise...." 33 U.S.C. Sec. 908(c)(21). In the event that the claimant's post-injury actual earnings "do not fairly and reasonably represent his wage-earning capacity," Sec. 908(h) of the statute authorizes the decisionmaker to,

in the interest of justice, fix such wage-earning capacity as shall be reasonable, having due regard to the nature of his injury, the degree of physical impairment, his usual employment, and any other factors or circumstances in the case which may affect his capacity to earn wages in his disabled condition, including the effect of disability as it may naturally extend into the future.

Id. This court has interpreted Sec. 908(h) to mean that even higher post-injury earnings do not preclude compensation for the claimant if the claimant has, nevertheless, suffered a loss of wage-earning capacity. Long v. Director, OWCP, 767 F.2d 1578, 1582 (9th Cir.1985) (holding that higher wages did represent wage-earning capacity in this case); Todd Shipyards Corp. v. Allan, 666 F.2d 399, 402 (9th Cir.) (holding that higher wages did not represent wage-earning capacity), cert. denied, 459 U.S. 1034, 103 S. Ct. 444, 74 L. Ed. 2d 600 (1982); Portland Stevedoring Co. v. Johnson, 442 F.2d 411, 411-12 (9th Cir.1971) (same).

The ALJ's determination that Mr. Gross' equivalent or higher post-injury wages do not represent his wage-earning capacity must be upheld if it is supported by substantial evidence. Long, 767 F.2d at 1582. The ALJ relied on three conditions to support his holding that Mr. Gross' post-injury wages do not accurately reflect his loss in wage-earning capacity: (1) A marked decrease in hours worked from the year before injury (2,239.75 hrs.) to the two years following maximum medical improvement after the injury (1986: 1587.5 hrs., 1987 (50 weeks): 1795.5 hrs.); (2) Mr. Gross often works a "hoot owl" shift for only five hours which pays more than an eight-hour day shift, explaining his equivalent or higher post-injury earnings despite reduced hours; and (3) Mr. Gross' testimony that he often works with pain and limitations because of the financial obligations he has to his wife and three children.

The second of these three circumstances is not supported by substantial evidence. One doctor, Dr. Williamson-Kirkland, did report in February, 1986 that Mr. Gross told him he worked the hoot owl shift because the eight-hour shift left him too stiff and sore. However, Mr. Gross testified at the formal hearing in January, 1988 that he did not prefer the hoot owl shift and did not work that shift significantly more than he had before the injury. His testimony at a formal hearing on the subject should be given more weight than a comment in medical notes taken two years earlier.6

The decrease in Mr. Gross' post-injury hours is uncontested and can be calculated from the employer's records which are before the court. Mr. Gross testified that he had lost hours because of pain and suffering, but that he had not kept track of how many hours. The ALJ inferred that all of the reduction in hours could be attributed to his disability. Given Mr. Gross' testimony that he had the same amount of work available to him as before the injury and that he worked those hours "[e]xcept for times that I've had to take off," Albert Gross v. Container Stevedoring Co., No. 14-77939, Hearing Transcript at 38 (OWCP Jan. 13, 1988), the inference is reasonable.

Mr. Gross' testimony that he continues to work with pain and limitations is not contradicted by anything in the record and is supported by the reports of several doctors. Further, the two most recent treating physicians, Dr. Linder and Dr. Wilder, stated in September, 1986 and December, 1987, respectively, that Mr. Gross suffers a significant permanent partial disability. Dr. Linder put the disability at 22% and Dr. Wilder at 20%.7 Therefore, Mr. Gross' physical condition supports an inference that his wage-earning capacity is reduced. Further, speaking of Mr. Gross' truck-driving responsibilities at work, Dr. Linder stated in his September 16, 1986 letter to claimant's attorney, "I do not feel that it is reasonable for him to continue to do this type of activity and it can be anticipated that it will lead to worsening symptoms and worsening disability."

The only evidence in the record that counters the suggestion that Mr. Gross' post-injury earnings do not reflect his wage-earning capacity, other than the fact that he has been working essentially full-time and is earning as much or more than he did before he was injured, is Container Stevedoring's suggestion that the availability of Stevedoring work has dropped off significantly since Mr. Gross was injured and that this reduction, not his injury, explains his reduced hours. The argument is based on a comparison of annual figures from 1983 to 1986 showing that the number of workers in Mr. Gross' category has dropped from 506 to 479 during that time, and the average hours worked per worker per year has dropped from 1,658.5 to 1,576.33. The significance of this degree of change is dubious. Even if accepted as significant, it is not clear that the reduction translates into fewer hours available for work. Mr. Gross testified that he perceived that the same number of hours were available to him to work, if he was able, after the injury as before.

We have reviewed an ALJ's consideration of the question whether post-injury wages accurately represent wage-earning capacity in three prior cases. In Todd Shipyards, we noted that although a claimant's post-injury wages were higher than his pre-injury wages because of a promotion, his 25% disability made him unfit for his previous jobs in the shipbuilding industry and for many jobs in the open market should he someday lose his position for whatever reason. 666 F.2d at 402. Therefore, we sustained the ALJ's holding as supported by substantial evidence that the claimant's wages did not fairly represent his wage-earning capacity. Id.

In Portland Stevedoring, we reversed the district court and reinstated compensation for loss of wage-earning capacity for a worker whose increased post-injury wages were due to a promotion, a raise, and an extra shift. 442 F.2d at 412. We said, "In light of the limited scope of judicial review in cases such as this, we think that the findings of the Deputy Commissioner should have been allowed to stand. Those findings were not without substantial evidentiary support." Id.

In Long, we again affirmed the holding of an ALJ regarding wage-earning capacity. However, in that case, the ALJ had found that a man with a 10% disability, who had been promoted twice since the injury and had held his then-current position for almost ten years, was in no danger of losing his job. 767 F.2d at 1582-83. Although he could not work at his previous job or at certain other jobs on the open market, the ALJ held that his wages fairly represented his wage-earning capacity, and we affirmed that holding.

The reasoning in Todd Shipyards, Portland Stevedoring, and Long supports our decision to affirm the Board and the ALJ in granting Mr. Gross compensation for lost wage-earning capacity. Mr. Gross' 20-22% disability, combined with his reduced hours and the fact that he continues to work at his present job in pain because of family obligations, is substantial evidence that his present wages do not fairly represent his wage-earning capacity.8 Container Stevedoring's evidence of a reduction in available work is not compelling and is contradicted by Mr. Gross' testimony from his own experience. Therefore, we affirm the Board's and the ALJ's holding that Mr. Gross' wages do not fairly represent his wage-earning capacity.

Container Stevedoring also argues that the ALJ chose inappropriate figures from which to calculate the loss in wage-earning capacity and the weekly compensation due Mr. Gross. The ALJ simply compared the average hours-per-week worked by Mr. Gross in 1986-87 with the average hours per week worked in 1983, the year before the accident. The post-injury average was 23% lower than the pre-injury average. The ALJ said that Mr. Gross had sustained a 23% loss in wage-earning capacity and, therefore, awarded him two-thirds of the dollar amount of that loss calculated from his weekly wage on the date of injury. Container Stevedoring was ordered to pay Mr. Gross $163.28 per week.

Container Stevedoring suggests that the ALJ should have compared only 1987 with 1983 hours, yielding a 16.6% loss in wage-earning capacity and a compensation rate of $118.00 per week. Container Stevedoring points out that Mr. Gross worked seventy hours less in each of the first three quarters of 1986 than in any quarter thereafter. It argues that this represents a significant and sustained improvement in the hours Mr. Gross is able to work.

The ALJ could have chosen to compare only 1987 with 1983 hours. However, comparing 1986 and 1987 with 1983 hours makes sense in context. The ALJ determined from medical evidence that January 16, 1986 was the point of maximum medical improvement from Mr. Gross. That date was important as the last day for which Container Stevedoring owed Mr. Gross temporary partial disability payments. Container Stevedoring did not appeal the choice of that date to the Board or to this court. It makes sense to compare the average weekly hours from all the time Mr. Gross has worked since the date of maximum medical improvement with the hours worked in the year before injury. We hold that the ALJ's method of calculating the rate of compensation is supported by substantial evidence.

We AFFIRM the Board. We agree with the ALJ's holding that the OWCP has a valid absolute defense to Special Fund liability because of Container Stevedoring's untimely application. We also agree with the Board that the ALJ's determination that Mr. Gross' post-injury wages do not reflect his wage-earning capacity is supported by substantial evidence, and that the ALJ's calculation of the rate of compensation is acceptable.

Under the applicable regulations, a request for special fund relief should be made "as soon as the permanency of the claimant's condition becomes known or is an issue in dispute." 20 C.F.R. Sec. 702.321(b). The court today concludes that permanency is either "known" or "in dispute" whenever it is mentioned in a compensation-related document, however tangential to the actual course of proceedings such reference may be. This harsh rule does not comport with the relevant statutory or regulatory language, nor is it supported by the policies underlying the LHWCA or by common sense. Accordingly, I disagree with the court's conclusion that Container Stevedoring's request for special fund relief was untimely. Rather, I--like the Benefits Review Board--would affirm the denial of special fund relief on the merits.

* "The LHWCA ... favors the dispositions of claims--the allocation of statutory benefits and burdens--on the merits of particular cases." Cornell University v. Velez, 856 F.2d 402, 405 (1st Cir.1988) (upholding ALJ's sua sponte consideration of an untimely special fund application). There is, of course, a "systemic interest in demanding timely pleadings which narrow and define the issues" which must be balanced against the "need to render justice." Id.; see also Brady-Hamilton Stevedore Co. v. Director, OWCP, 779 F.2d 512, 513 (9th Cir.1985) (observing that a "claim for [special fund] relief must be made by the employer at the first hearing ... to assure that all factual issues are known and subject to litigation at the same time"). Here, however, the court's reading of the relevant statutes and regulations has needlessly tipped the scales against the rendering of justice. Indeed, this is one of the rare cases in which both the interest of justice and the interest of expediency favor resolution of the relevant issue on the merits.

In reaching its result today, the court found two isolated references to permanency from which it concluded, in complete disregard of the rest of the record, that permanency was either "known" or "at issue."1 The relevant statutory and regulatory language, however, suggests that such a rigid approach should not be employed in determining the timeliness of a request for special fund relief. For example, the applicable federal regulation provides that:

A request for section 8(f) relief should be made as soon as the permanency of the claimant's condition becomes known or is an issue in dispute. This could be when benefits are first paid for permanent disability, or at an informal conference held to discuss the permanency of the claimant's condition.

20 C.F.R. Sec. 702.321(b). The illustrations in this regulation are telling. Notably, under either scenario--payment of permanent disability benefits or discussion of permanency at an informal conference--all parties involved will necessarily understand which issues are truly disputed. Under both scenarios listed in the regulation, the likelihood of confusion or misunderstanding, such as occurred here, would be diminished.

Similarly, the controlling statute also does not require the court's harsh result. Section 908(f)(3) provides in relevant part:

Any request ... for apportionment of liability to the special fund ... shall be presented to the deputy commissioner prior to the consideration of the claim by the deputy commissioner. Failure to present such request prior to such consideration shall be an absolute defense to the special fund's liability for the payment of any benefits with such claim, unless the employer could not have reasonably anticipated the liability of the special fund prior to the issuance of a compensation order.

33 U.S.C. Sec. 908(f)(3) (emphasis added). Determination of "reasonable anticipation" requires, almost by definition, consideration of the entire record.2

When the record in the present case is viewed in its entirety, a different picture than that presented by the court emerges. The record, such as it is,3 suggests that Gross pursued recovery of benefits for temporary, total disability before the OWCP's claims examiner. Gross requested an informal hearing before the deputy commissioner at least twice; each request was denied. Following the second, an OWCP claims examiner wrote to Gross's counsel:

Your request for informal conference was addressed on 12/30/86. There have been no subsequent medical reports submitted indicating that the claimant is TTD [Temporary Total Disabled]. The last medical report that you submitted from Dr. Wilder indicated that the claimant continued to work.

While Gross's actual requests for an informal hearing are not part of the record, the claims examiner's response suggests that Gross requested a hearing only on the temporary total disability issue. Container Stevedoring was entitled to rely upon Gross's requests in determining the matters at issue. See 20 C.F.R. Sec. 702.231(b)(i) ("All parties are required to list issue [sic] reasonably anticipated to be discussed at the conference when the initial request for a conference is made and to notify all parties of additional issues which arise during the period before the conference is actually held.").

Moreover, there is nothing in the record to indicate that the deputy commissioner ever actually considered Gross's claim of permanent disability, a necessary element in the court's timeliness analysis. As previously noted, the record suggests that the deputy commissioner considered only Gross's claim of temporary total disability. I agree with the court that the deputy commissioner, while required to consider all claims presented to him or her, is not obligated to correspond or to hold an informal hearing regarding each such claim. See ante at 1548. However, I, unlike the court, cannot assume that the claim was considered where the clear inference drawn from the correspondence in the record is that the deputy commissioner considered only the total temporary disability claim.

Finally, and perhaps most significantly, the equities in this case weigh in Container Stevedoring's favor. The OWCP's correspondence to Gross suggests that an informal hearing was unnecessary due to Gross's failure to provide evidence corroborating his temporary, total disability claim. It is truly ironic that Gross's failure to articulate clearly his claims before the deputy commissioner now supports a procedural bar against Container Stevedoring in its request for section 8(f) relief. Indeed, the court's reasoning may actually encourage parties to obfuscate issues and to fail to disclose fully.

In short, this case at the administrative level was marked by a lack of communication between the parties and the ALJ. The parties must equally share responsibility for the communications breakdown. The negative consequences of the failure to communicate should not redound solely to the employer. Because Container Stevedoring sought special fund relief as soon as it was reasonably clear that permanency was truly at issue, I would hold that the request was timely.

While I would not bar Container Stevedoring's request for special fund relief on grounds of untimeliness, I would affirm the denial of special fund relief on the merits. To be entitled to section 8(f) relief, the employer must establish (1) that the employee had an existing permanent partial disability prior to the employment injury; (2) that the disability was manifest to the employer prior to the employment injury; and (3) that the current disability is not due solely to the most recent injury. Todd Pacific Shipyards v. Director, OWCP (Mayes), 913 F.2d 1426, 1429 (9th Cir.1990) (hereinafter Mayes ).

Container Stevedoring contends that Mr. Gross had two pre-existing injuries: (1) a compression fracture sustained in 1969, and (2) a degenerative disc disease diagnosed in November 1987. As to the first alleged pre-existing jury, the ALJ found that Container Stevedoring had not shown either the first or third factors. Based on testimony of one Dr. Wilder, the ALJ concluded that the 1969 back injury was neither a "permanent" disability, nor did it in any way impact the seriousness of Mr. Gross's 1984 injury.

As to the degenerative disc disease, the ALJ concluded that Container Stevedoring proved neither the first nor the second factor. The ALJ observed that the disease was first diagnosed in November 1987, three years after the injury at issue. Thus, the ALJ concluded, the injury was neither pre-existing nor manifest to Container Stevedoring.

The ALJ's findings of fact must be treated as conclusive if supported by substantial evidence. See Mayes, 913 F.2d at 1428. Here, while evidence adduced by Container Stevedoring supported contrary inferences, the ALJ's conclusions were reasonable and supported by medical testimony. Thus, I do not believe that it can fairly be said that the conclusions were not supported by substantial evidence.III

In sum, I would affirm the denial of Container Stevedoring's request for special fund relief on the merits, rather than on the procedural ground invoked by the court. However, I concur in the court's opinion in all other respects.